Economic freedom necessary for personal prosperity
The Democrats rode into power in D.C. with a promise to return the government's focus to middle and lower classes who greatly rely on it. The ambitious policies they wanted included universal health care, increased funding into green technologies and education and another war in the Middle East, apparently.
Unfortunately for them, a decade of poor stewardship of tax dollars left the government and the economy too strained for capital to accomplish these lofty ideals, as Americans demanded frugality by returning the House of Representatives to Republicans in 2010.
For all the high rhetoric, whether liberal or conservative, a bad economy spells doom for incumbents. Consider 1992 when President George H.W. Bush had just overseen the most successful United States military operation in decades with the Gulf War.
He, however, lost his re-election bid to a governor from Arkansas because, as Bill Clinton's campaign strategist James Carvill said, "It's the economy, stupid."
The important thing to take from this is people's ideologies and stated priorities quickly change when prices rise or people start getting laid off en masse.
Despite our reputation as a culture that celebrates the creation of wealth, tough times see more Americans turning a skeptical eye toward the rich and our current disparity of wealth. Skepticism is healthy, but when emotions are running high, it can cede to the Dark Side: resentment, fear, anger and hate.
Is a wide disparity of wealth always bad, or are we letting emotion sway us beyond reason? Rather than debate theories, let's compare nations on how good life is for their citizens, and how their economic policies differ. Does redistribution produce better results than a laissez-faire system?
First, let's get our terms clarified. I'll be comparing rankings of "Economic freedom," generally referring to a system of free trade, equal legal rights, low taxation, low regulation and high degrees of consumer choice, with a ranking of "economic equality," which refers to the disparity of wealth within a country, reduced through higher taxes and wage laws.
To determine which system results in better living conditions, let's examine the developed countries with the highest and lowest standards of living and see how free their economies are and how equally distributed their wealth is.
The information in the box is obtained from the United Nation's Human Development Index to measure standard of living, the Heritage Foundation's 2010 Index of Economic Freedom and the Gini coefficient applied to economic data from the U.N.'s Development Programme to measure economic equality.
Countries’ economic freedom vs. economic equality by rank of standard of living:
Norway (37, 5)
Australia (3, 45)
New Zealand (4, 51)
USA (8, 76)
Ireland (5, 38)
Netherlands (15, 20)
Canada (7, 24)
Sweden (21, 3)
Germany (23, 11)
Poland (71, 41)
Portugal (62, 57)
Hungary (51, 9)
Estonia (16, 47
Slovakia (35, 6)
The results aren't overwhelming, but they do lean one direction more than the other. Six of the nine countries in the world with the highest standard of living are more free than equal, and all of the bottom five except for Estonia (a Soviet territory until 1990) are more equally distributed than free. Three of the top five countries with the highest standard of living are also in the top five for economic freedom. It's hardly a definitive conclusion, but it appears that economic freedom correlates to prosperity for everyone much more than economic equality does.
For those not convinced, consider the world's freest economy, Hong Kong. Asia has been trying to catch up to the West economically for the last century, with mixed success. As neighboring China has tried to plan its growth, ranking 140th in economic freedom, it has suffered a 91st-ranked standard of living. Hong Kong has surged ahead by freeing its economy, climbing to 21st in the world in standard of living, surpassing the United Kingdom, Italy and Austria in the last four years.
Regulations and government programs don't help people climb out of poverty nearly as much as they prevent people from rising to prosperity. They create an environment where winning the government's favor is a prerequisite to pursuing our own interests.
The next time some billionaire says we should raise taxes on the "rich" or some economist says we need to spend more in the face of a national debt now equal to the nation's GDP, think about the lightning pace at which the middle class in freer Asian economies is emerging and prospering. Think of the famines they suffered not that long ago under rigorously planned economies.
Equal or free? I'll take equal for the law and free for commerce.